Best Ways to Become Debt Free
Find out about the different ways to deal with debts if you are falling behind with day-to-day bills, loan and credit card repayments or other financial commitments, like your rent or mortgage. Then get some free debt advice before you make a decision.
Debt Management Plan – It is suitable if you have non-priority debts such as credit cards, overdraft or personal loans. This allows you to pay back debts at a rate you can afford. You make one monthly payment to the Debt Management Plan provider.
Debt Relief Order – This is suitable if you are on a low income with very few assets. Or freezes debt for a year then writes it off completely if your circumstances haven’t changed. Once a Debt Relief Order is agreed, you make no further payments to the people you owe money to (your creditors). Your creditors are only likely to agree to a Debt Relief Order if it is unlikely that you will ever be able to clear your debts.
Bankruptcy – If you file for bankruptcy, it will allow you to make a fresh start. Writes off all debts you can prove you owe. If you have any assets, they will be taken and used to pay off your debts.
Full or Final Settlement – If you have a lump sum that would cover part of your debts, you could ask your creditors whether they would accept a part payment and allow you to write off the rest. Alternatively, they may allow you to make monthly payments for an agreed period after which the balance is written off.
Individual Voluntary Arrangement – This will allow you to pay back what you can afford. This usually sets an amount of time and anything you haven’t paid off by the end is written off. Individual voluntary arrangement is a legally binding agreement – this means once you’ve signed it, neither you nor your creditors can back out of it.
Write Off Your Debt – This is only suitable in exceptional circumstances if you have no available income, savings or assets. You must be able to show your creditors that your circumstances are unlikely to improve in future (for example, if you are severely ill)
It’s always best to talk things through with an experienced debt adviser before you decide how you’re going to pay off debts.
There are many ways to clear your debts and some are well known than others. The one that is best for you will depend on your personal circumstances.
A free debt adviser can help you make the right decisions so that most of your money will go to paying off your debts – meaning you could be debt free sooner than you thought.
The people that let debts build up before they seek advice often find things have spiraled out of control, their cards are maxed out, no-one else will lend to them and it takes much longer to pay back what they owe.